Exhibit 99.1
Magnetek Announces Fiscal 2005 Year-End Results
LOS ANGELES--(BUSINESS WIRE)--Aug. 25, 2005--Magnetek, Inc.
(NYSE:MAG):
-- Fiscal 2005 revenue from continuing operations increased 5%.
-- Earnings from continuing operations were $.03 per share for
the year.
-- Losses related to discontinued operations amounted to $.97 per
share.
Magnetek, Inc. (NYSE:MAG) today reported the results of its 2005
fiscal year, which ended on July 3, 2005(a).
Fiscal 2005 revenue from continuing operations was $242.4 million,
up from $230.3 million in fiscal 2004. Gross profit amounted to $60.0
million (24.8% of sales), up from $54.3 million (23.6% of sales) in
fiscal 2004. Operating profit was $3.6 million versus an operating
loss of $0.6 million in fiscal 2004. Income from continuing operations
before taxes was $3.2 million vs. a loss before taxes of $2.8 million
in fiscal 2004. Income from continuing operations was $0.8 million, or
$.03 per share, versus a loss of $9.5 million, or $.35 per share, in
fiscal 2004.
Excluding non-cash income tax charges (see Note 1 below) income
from continuing operations was $2.4 million, or .$08 per share, vs. a
loss of $2.8 million, or $.10 per share, in fiscal 2004.
Discontinued operations accounted for losses of $27.7 million, or
$.97 per share, in fiscal 2005 and losses of $3.6 million, or $.13 per
share, in fiscal 2004, resulting in a net loss for the Company of $.94
per share in fiscal 2005 and a net loss of $.48 per share in fiscal
2004.
An arbitration award included in Magnetek's third-quarter 2005
results accounted for most of the losses of discontinued operations in
fiscal 2005 ($22.0 million, or $.77 per share), and is reflected on
the Company's year-end balance sheet as an accrued liability. While
Magnetek is contesting this award in Federal Court, it has had
periodic settlement discussions and is preparing to pay the award, if
necessary, primarily through debt refinancing.
Fourth-Quarter Results
Revenue from continuing operations in the fiscal 2005 fourth
quarter was $57.1 million, down from $66.0 million in the fourth
quarter of fiscal 2004. Gross profit amounted to $14.1 million (24.7%
of sales) versus $16.4 million (24.9% of sales) in the fourth quarter
of fiscal 2004. Operating profit in the quarter was $1.0 million
versus $2.3 million in the fourth quarter of fiscal 2004. Income from
continuing operations before taxes was $0.6 million vs. $1.7 million
in the fourth quarter of fiscal 2004. Due to the non-cash income tax
charges footnoted below, the loss from continuing operations was $1.3
million, or $.05 per share, versus a loss of $5.0 million, or $.17 per
share, in the fourth quarter of fiscal 2004.
Excluding the non-cash income tax charges, Magnetek's fiscal 2005
fourth-quarter income from continuing operations was $0.3 million, or
..$01 per share, vs. $1.7 million, or $.06 per share, in the fourth
quarter of fiscal 2004.
Discontinued operations accounted for losses of $2.4 million, or
$.08 per share, in the fourth quarter of fiscal 2005 and losses of
$0.6 million, or $.02 per share, in the fourth quarter of fiscal 2004,
resulting in a net loss for the Company of $.13 per share in the
fourth quarter of fiscal 2005 and a net loss of $.19 per share in the
fourth quarter of fiscal 2004.
As of July 3, the last day of its 2005 fiscal year(a), Magnetek's
six-month backlog stood at $61.1 million. Fourth-quarter 2005 bookings
deliverable within six months were $58.6 million, resulting in a
book-to-bill ratio of 1.03, and the Company's order mix continued to
shift toward higher margin digital power supplies and systems during
the quarter. Given the current economic outlook, Magnetek expects
fiscal 2006 revenues to increase 5 to 7 percent over fiscal 2005
levels with continued improvement in gross profit margins.
Conference Call Webcast
This morning, at 11:00 a.m. Eastern Time, Magnetek's president and
CEO, Tom Boren, and members of management will host a conference call
to discuss the Company's fiscal 2005 results. The call will be webcast
via a link from the "Investor Information" page of the website:
www.magnetek.com. For those who cannot listen to the call live, a
replay will be available by phoning 617-801-6888 (passcode 80680602)
through September 2 and on Magnetek's website for as long as the
call's content remains timely.
Magnetek's Board of Directors has set November 9, 2005, as the
date of the Company's Annual Meeting for shareholders of record as of
September 12, 2005. The meeting will be convened at 10:00 a.m. on the
17th floor of the Murdock Plaza office building, 10900 Wilshire
Boulevard, Los Angeles, Calif.
Magnetek, Inc. manufactures power control products and systems for
communications, data processing, industrial automation, consumer
products, mass transit, alternative and renewable energy, utility grid
monitoring, and other applications requiring highly reliable, precise,
energy-efficient power. The Company operates manufacturing and
research facilities in North America, Europe and China.
Note 1
While the Company has historically provided valuation reserves
against its U.S. deferred tax assets that result in a zero net
deferred tax position (net deferred assets equal to deferred tax
liabilities) in a fiscal year-end review of its tax accounts, the
Company determined that a portion of its deferred tax liability
relates to tax deductible amortization of goodwill that is no longer
amortized for financial reporting purposes. Under accounting rules,
such deferred tax liabilities are considered to have an indefinite
life and are therefore ineligible to be considered as a source of
future taxable income in assessing the realization of deferred tax
assets.
Thus, the Company has deductions for tax reporting purposes that
result in recording a non-cash tax expense for financial reporting
purposes.
Accordingly, the Company increased its valuation allowance for
deferred tax assets, resulting in an increase to the provision for
income taxes of $1.6 million in the fourth quarter and fiscal year
ended July 3, 2005. The Company also determined that such deferred tax
liabilities existed at June 27, 2004, and therefore has restated its
valuation allowance for deferred tax assets and increased its
provision for income taxes by $1.6 million in the fourth quarter and
fiscal year ended June 27, 2004, for a total provision for income
taxes and corresponding increase to its valuation allowance of $6.7
million in those periods.
While resulting in an increase to income tax expense for the
fiscal 2005 and 2004 periods, the amounts are non-cash and have no
impact on the Company's ability to use these assets to reduce any
future U.S. income tax liabilities. The Company expects to record a
non-cash income tax expense of approximately $1.6 million in
subsequent fiscal years until such time as the related goodwill is
fully amortized for income tax return purposes. As of July 3, 2005,
the Company had deferred tax assets aggregating $60.8 million, with a
corresponding valuation allowance of approximately $59.2 million.
(a) Magnetek's fiscal year ends on the Sunday nearest June 30.
This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding the Company's anticipated financial
results for its first quarter and fiscal year ending July 2, 2006.
These forward-looking statements are based on the Company's
expectations and are subject to risks and uncertainties that cannot be
predicted or quantified and are beyond the Company's control. Future
events and actual results could differ materially from those set forth
in, contemplated by, or underlying these forward-looking statements.
These risks and uncertainties include audit-related costs and findings
and legal proceedings and their effects on the Company's expected
financial results. Other factors that could cause actual results to
differ materially from expectations are described in the Company's
reports filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.
Magnetek, Inc.
Consolidated Results of Operations
(in thousands except per share data)
Three months Twelve months
ended ended
------------------ ------------------
(Unaudited)
July 3, June 27, July 3, June 27,
Results of Operations: 2005 2004 2005 2004
- ------------------------------ --------- --------- --------- ---------
Net sales $ 57,144 $ 65,962 $242,389 $230,280
Cost of sales 43,038 49,562 182,396 175,977
- ------------------------------ --------- --------- --------- ---------
Gross profit 14,106 16,400 59,993 54,303
Research and development 3,425 3,839 14,605 13,021
Selling, general and
administrative 9,684 10,252 41,820 41,864
- ------------------------------ --------- --------- --------- ---------
Income (loss) from operations 997 2,309 3,568 (582)
Interest (income) expense(1) 440 (400) 1,624 1,207
Other (income) expense(2) - 981 (1,300) 981
- ------------------------------ --------- --------- --------- ---------
Income (loss) from continuing
operations before provision
for income taxes 557 1,728 3,244 (2,770)
Provision for income taxes(3) 1,900 6,700 2,425 6,700
- ------------------------------ --------- --------- --------- ---------
Income (loss) from continuing
operations (1,343) (4,972) 819 (9,470)
Loss from discontinued
operations, net of tax(4) (2,428) (565) (27,689) (3,601)
- ------------------------------ --------- --------- --------- ---------
Net loss $ (3,771) $ (5,537) $(26,870) $(13,071)
- ------------------------------ --------- --------- --------- ---------
Per common share:
Net income (loss) from
continuing operations --
basic & diluted $ (0.05) $ (0.17) $ 0.03 $ (0.35)
Net loss from discontinued
operations -- basic & diluted $ (0.08) $ (0.02) $ (0.97) $ (0.13)
Net loss -- basic & diluted $ (0.13) $ (0.19) $ (0.94) $ (0.48)
- ------------------------------ --------- --------- --------- ---------
Weighted average shares
outstanding:
Basic 28,575 28,486 28,535 27,094
Diluted 28,575 28,486 29,105 27,094
- ------------------------------ --------- --------- --------- ---------
(1) Includes $1.0 million interest income related to a tax refund
receivable in the three- and twelve-month periods ended
June 27, 2004
(2) Includes $1.3 million income from sale and license of rights and
patents in the twelve-month period ended July 3, 2005, and a
$0.7 million charge for write down of investments and a
$0.3 million contingent fee related to a tax refund receivable in
the three- and twelve-month periods ended June 27, 2004
(3) Includes $1.6 million and $6.7 million non-cash charge to
increase valuation allowance for deferred tax assets in the three-
and twelve-month periods ended July 3, 2005 and June 27, 2004,
respectively
(4) Includes a $22.0 million patent arbitration charge in the
twelve-month period ended July 3, 2005; the results of the
Company's telecom power business; and certain costs of divested
businesses (primarily legal expenses) for all periods presented
Three months Twelve months
ended ended
------------------ ------------------
(Unaudited)
July 3, June 27, July 3, June 27,
Other Data: 2005 2004 2005 2004
- ------------------------------ --------- --------- --------- ---------
Depreciation and amortization $ 1,866 $ 2,134 $ 9,136 $ 9,591
Capital expenditures $ 2,890 $ 2,465 $ 8,958 $ 5,894
July 3, June 27,
Balance Sheet Data: 2005 2004
- ------------------------------ --------- --------- --------- ---------
Working capital (excluding
current portion of LTD) $ 51,441 $ 65,360
Total assets 229,180 228,024
Total long-term debt
(including current portion) 25,230 18,126
Stockholders' equity 45,554 109,922
Magnetek, Inc.
Consolidated Balance Sheet
(in thousands)
July 3, June 27,
2005 2004
---------------- --------------
Cash $6,854 $2,318
Accounts receivable 54,022 56,056
Inventories 49,950 48,872
Prepaid and other current assets 5,713 6,372
Assets held for sale 4,727 4,474
---------------- --------------
Total current assets 121,266 118,092
Property, plant & equipment, net 31,939 31,855
Goodwill 63,656 63,828
Other assets 12,319 14,249
---------------- --------------
Total assets $229,180 $228,024
================ ==============
Accounts payable $36,974 $40,031
Accrued liabilities 9,029 11,067
Accrued arbitration award 22,602 -
Liabilities held for sale 1,220 1,634
Current portion of long-term debt 4,945 1,997
---------------- --------------
Total current liabilities 74,770 54,729
Long-term debt, net of current
portion 20,285 16,129
Pension benefit obligations 70,568 31,366
Other long-term obligations 7,627 7,552
Deferred income taxes 10,376 8,326
Common stock 286 285
Paid in capital in excess of par
value 128,158 127,692
Retained earnings 40,018 66,888
Accumulated other comprehensive loss (122,908) (84,943)
---------------- --------------
Total stockholders' equity 45,554 109,922
Total liabilities and equity $229,180 $228,024
================ ==============
Certain June 27, 2004, balances have been reclassified to conform to
current period presentation
CONTACT: Magnetek, Inc.
Robert Murray, 310-689-1610
bmurray@magnetek.com